NIH Cuts On Hold After States Sue

A federal judge blocked the National Institutes of Health administration from carrying out a plan to cap payments for costs indirectly related to research after American medical colleges and a coalition of 22 Democratic attorneys general challenged the policy in lawsuits filed Monday.

The policy change, which was announced late Friday and briefly in place Monday before the judge blocked it, would likely cost colleges billions if it goes into full effect. The White House said the cap would make more money available for “legitimate scientific research,” though NIH officials touted the change as a way to save more than $4 billion.

“Without relief from NIH’s action, these institutions’ cutting-edge work to cure and treat human disease will grind to a halt,” the states argued in the lawsuit. “These universities and research institutions are vital economic and social institutions in each state, employing thousands of their citizens, educating and training thousands more, and creating investment and partnering opportunities with the private sector.”

The states asked a federal judge to temporarily block guidance that caps indirect expenses at 15 percent of the direct research costs—down from the average of 28 percent—which goes to pay for laboratory space and hazardous waste removal, among other expenses associated with research projects. Although Trump has cast indirect costs as another example of wasteful federal spending, university officials warned in court filings of operational chaos and job losses as colleges adjust to the immediate financial losses.

If the NIH notice remains in effect, SUNY institutions will face a Sophie’s choice—either redirect funding from other essential programs or be forced to end lifesaving NIH-funded research programs prematurely.”

—Ben Friedman, State University of New York

The order, handed down Monday evening, only applies to the 22 states party to the lawsuit, but an order in a separate lawsuit from The Association of American Medical Colleges barred the NIH from enforcing the cap. U.S. District Judge Angel Kelley, who was appointed by former president Biden, scheduled a hearing in both cases for Feb. 21.

The Association of American Universities and the American Council on Education, along with other higher education groups and universities, filed a separate lawsuit Monday challenging the rate cap.

The attorneys general argued in the states’ lawsuit that the change is “arbitrary and capricious” and that NIH doesn’t have the authority to unilaterally change the cap. Lowering the cap also violates a provision in the federal budget that prohibits the agency from changing the approach to reimbursement of indirect costs, according to the lawsuit.

The lawsuits add to growing pushback against the policy change. Over the weekend, Senate Democrats decried the rate cut as illegal, and some Republican lawmakers are voicing concern. Senator Susan Collins, the Republican from Maine, called the plan “poorly conceived” in a statement released Monday. The cuts “would be devastating, stopping vital biomedical research and leading to the loss of jobs,” she added.

The University of Maine would lose about $1.4 million under a 15 percent rate, according to court filings.

Collins, who chairs the powerful Senate appropriations committee, said she talked to Robert F. Kennedy Jr., President Trump’s pick to lead the Department of Health and Human Services, to express her opposition to the plan. Kennedy promised to re-examine the rate cut, she said. Collins is still planning to support Kennedy’s confirmation as secretary.

Senator Katie Britt, an Alabama Republican, told Al.com over the weekend that she wanted to work with Kennedy on the cuts.

“While the administration works to achieve this goal at NIH, a smart, targeted approach is needed in order to not hinder life-saving, groundbreaking research at high-achieving institutions like those in Alabama,” Britt said.

‘Rip-Off’ or ‘Necessary’?

Elon Musk, the unelected billionaire Trump unilaterally appointed to cut trillions of dollars from the federal budget, described indirect cost reimbursement rates as “a rip-off” on social media. In contrast, the lawsuit argues that indirect cost reimbursements are essential to conducting medical research.

While direct costs are categorized as the line-item expenses immediately necessary to carry out a specific project—including salaries for researchers, graduate students and lab personnel; equipment and supplies; and travel to conduct research or disseminate results—those projects also rely on funding for facilities and administrative costs (otherwise known as indirect costs) that “cannot be attributed to any particular research project, but are still necessary for any research to occur,” according to the lawsuit.

“For example, in order to conduct research, a university needs buildings, and needs to maintain those buildings and supply them with heat and electricity,” the states say. “A university also needs the infrastructure necessary to comply with legal, regulatory, and reporting requirements … And university staff need administrative support, including clerical staff, IT support, cybersecurity and data repositories, as well as staff to administer the university as a whole.”

In fiscal year 2024, the NIH sent about $26 billion to more than 500 grant recipients connected to colleges—$7 billion of which went to indirect costs.

Since 1965, institutions have been able to periodically negotiate their reimbursement rates directly with the federal government, with some receiving more than 50 percent of the direct grants. Institutional rates can vary widely, depending on factors such as geographic cost differences and the type of research.

Although the NIH’s announcement Friday claimed its guidance comes in part because indirect costs are “difficult for NIH to oversee,” the lawsuit argues that the agency has long had mechanisms in place to hold institutions accountable.

“After the indirect cost rate is agreed upon and the actual indirect costs are incurred, federal agencies can conduct audits to ensure that the negotiated indirect cost rate conforms to the actual indirect costs that are incurred,” the states argue. “The indirect cost rate is then adjusted if the audit establishes that the institution has recovered excess costs.”

This isn’t Trump’s first attempt to cap indirect costs.

In 2017, he proposed a 10 percent cap on indirect costs, which Congress rejected. The next year, Congress approved language in an appropriations bill that prohibited the NIH or the HHS from making any “deviations from negotiated rates,” which has been included in every appropriations bill since.

But less than a month into his second term, Trump didn’t wait for congressional approval.

Universities Weigh In

More than 30 research universities from across the country submitted declarations in support of the plaintiffs’ motion for a temporary restraining order that detailed expected losses under the cap and other consequences. College officials told the court that they expect to see immediate and negative impacts from the rate cap and would face difficult decisions as they adjust to the revenue losses if the policy change took effect.

For instance, the State University of New York expects to draw funds from the NIH on Friday and estimates that it would lose $600,000 in reimbursements for costs that occurred in the last two weeks, according to a declaration from Ben Friedman, the chief operating officer of the Research Foundation for the State University of New York. Over all, the system would lose at least $79 million under the cap.

“This is almost certainly an undercount of potential losses, as most SUNY grants are awarded in yearly installments, and these figures count only the current active yearly installment,” Friedman wrote.

Other university officials from the University of California system to the University of Rhode Island told a similar story in the declarations. The cap will mean that colleges have less money to pay for salaries, technology and clinical trials, among other items, and thus will have to stop some research activities.

“If the NIH notice remains in effect, SUNY institutions will face a Sophie’s choice—either redirect funding from other essential programs or be forced to end lifesaving NIH-funded research programs prematurely,” Friedman wrote.

Greg Hirth, the vice president for research at Brown University, estimated that the university would have lost about $27 million had the cap been in place for fiscal year 2024. Already in fiscal year 2025, the cap would mean about $16 million less in federal funding.

And Brown can’t make up the difference via alternative means, Hirth wrote. (College officials said last fall the university was facing a $46 million budget deficit.)

Hirth wrote that Brown would “move very quickly to adjust its operations in order to absorb the loss of revenue,” including cutting more than 200 jobs. Additionally, a $400 million research facility that’s in the works might not be feasible under a 15 percent cap.

Some schools at Brown would be hit harder than others. For example, “almost all of the School of Public Health’s research is supported by NIH grants, so a dramatic reduction in funding would affect everything the school does,” Hirth wrote.

“There is no simpler way to put it: At a 15 percent indirect cost rate, many of Brown’s current research projects and clinical trials will be forced to cease abruptly,” Hirth wrote.